Leases

Effective January 1, 2019, the Company adopted FASB ASC Topic 842, Leases (“ASC 842”). As a result, comparative prior periods have not been adjusted and continue to be reported under FASB ASC Topic 840, Leases. See Note 14 of the Notes to the Consolidated Financial Statements included herein for additional information regarding the Company’s adoption of ASC 842. The policies described herein refer to those in effect as of January 1, 2019.

The Company leases office space in North America, Europe, Asia, South America, and Australia. This space is primarily used for office and administrative purposes by the Company’s employees in performing professional services. These leases are classified as operating leases and expire between years 2019 through 2032. Finance leases are considered to be immaterial to the Company.

The Company’s leasing policies are established in accordance with ASC 842, and accordingly, the Company recognizes on the balance sheet at the time of lease commencement a right-of-use asset and a lease liability, initially measured at the present value of the lease payments. Right-of-use lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. All right-of-use assets are reviewed for impairment. As the Company’s implicit rate in its leases is not readily determinable, in determining the present value of lease payments, the Company uses its incremental borrowing rate based on the information available at the commencement date. Lease payments included in the measurement of the lease liability are comprised of noncancelable lease payments, payments based upon an index or rate, payments for optional renewal periods where it is reasonably certain the renewal period will be exercised, and payments for early termination options unless it is reasonably certain the lease will not be terminated early.

Lease costs are recognized in the Consolidated Statement of Operations over the lease term on a straight-line basis. Leasehold improvements are depreciated on a straight-line basis over the lesser of the term of the related lease or the estimated useful life of the asset.

Some of the Company’s leases contain variable lease payments, including payments based upon an index or rate. Variable lease payments based upon an index or rate are initially measured using the index or rate in effect at the lease commencement date and are included within the lease liabilities. Lease liabilities are not remeasured as a result of changes in the index or rate, rather changes in these types of payments are recognized in the period in which the obligation for those payments is incurred. In addition, some of our leases contain variable payments for utilities, insurance, real estate tax, repairs and maintenance, and other variable operating expenses. Such amounts are not included in the measurement of the lease liability and are recognized in the period when the facts and circumstances on which the variable lease payments are based upon occur.

The Company’s leases include options to extend or renew the lease through 2040. The renewal and extension options are not included in the lease term as the Company is not reasonably certain that it will exercise its option.

From time to time, the Company enters into sublease arrangements both with unrelated third-parties and with our partner agencies. These leases are classified as operating leases and expire between years 2019 through 2024. Sublease income is recognized over the lease term on a straight-line basis. Currently, the Company subleases office space in North America, Europe and Asia.

As of March 31, 2019, the Company has entered into certain operating leases for which the commencement date has not yet occurred as these lease spaces are in the process of being prepared by the landlord for occupancy. Accordingly, these leases represent obligations of the Company that are not on the Consolidated Balance Sheet as of March 31, 2019. The future liability related to these leases is approximately $8 million.

The discount rate used for leases accounted for under ASC 842 is the Company’s collateralized credit adjusted borrowing rate.

The following table presents lease costs and other quantitative information for the three months ended March 31, 2019:



	Three Months Ended March 31,
	2019
Lease Cost:
Operating lease cost	$	16,441
Variable lease cost	4,964
Sublease rental income	(1,599		)
Total lease cost	$	19,806
Additional information:
Cash paid for amounts included in the measurement of lease liabilities for operating leases
Operating cash flows	$	15,652

Right-of-use assets obtained in exchange for operating lease liabilities	$	256,818
Weighted average remaining lease term (in years) - Operating leases	7.3
Weighted average discount rate - Operating leases	8.7

Operating lease expense is included in office and general expenses in the unaudited condensed Consolidated Statement of Operations. Short term lease expense is immaterial to the Company. Rental expense for the three months ended March 31, 2018 was $17,560 offset by $713 in sublease rental income.

The following table presents minimum future rental payments under the Company’s leases at March 31, 2019 and their reconciliation to the corresponding lease liabilities:



	Maturity Analysis
Remaining 2019	$	50,672
2020	65,996
2021	56,032
2022	46,124
2023	42,778
Thereafter	140,202
Total	401,804
Less: Present value discount	$	(109,066	)
Lease liability	$	292,738